The seventh Liverpool Biennial is the first of our age of austerity: with the closure of A Foundation, the city is a gallery down; a programme of citywide installations offering so much spectacle in 2010 appears somewhat scaled back, and Sky Arts have come in to fund what is possibly the showpiece of the whole event.

The channel’s Ignition project made a generous £200,000 available to Doug Aitken, and the Californian artist has spent the money on a pavilion hosting a multi-channel film about creativity. It is a welcome reminder that the best things in life, if not art, are in fact free.

David Adjaye was commissioned to design the space which plunges visitors into a babble of voices in the midst of six screens, and here Aitken interviews 18 professional artists of one type or another. It is a feat of engineering that when you close in on the chat which interests you the most, the sound is crystal clear.

This crucible of inspiration fits in well with the ambitions of the Biennial’s new director, Sally Tallant. Her introduction to the event compares 21st century Liverpool to the heyday of the Bauhaus school in Weimar or the Black Mountain College in North Carolina. Time will tell if there is any more history to write in the field of art.

But a condemned row of terraces near Anfield football stadium seem as far as one can get from the milieus which drew architects Walter Gropius, Mies van der Rohe, or Buckminster Fuller. Yet this is where a coach tour by 2Up 2Down brings visitors for one of the most galvanising artworks you will find anywhere.

A tour with guide/actor Carl Ainsworth whisks you through a history of forced-to-sell council houses and so-called regeneration zones, all from the relative safety of a coach. Finally, it drops visitors off at a community bakery (established by artist Jeanne van Heeswijk) where locals are coming together to demonstrate the neighbourhood is not quite so deprived as it might appear.

But if you’re doing the Biennial on foot, it makes sense to head for the city’s several galleries, which still punch above their weight in terms of space per head of local population.

Liverpool does, after all, have its own Tate, an art and tech centre in FACT, a newbuild photography gallery in Open Eye, a thriving contemporary art hub in the Bluecoat and an august civic institution which needs no introduction, the Walker.

So the scale is daunting. Perhaps the 2012 Biennial’s theme, hospitality, reflects the fact you would need to stay in the city for upwards of a week to stand a chance of seeing everything.

But highlights included Mark Wallinger and Thomas Hirschhorn at Tate, Pedro Reyes at FACT, Mark Morrisroe at Open Eye and John Akomfrah at the Bluecoat. A day before the festival opened, his three-channel film about the life of cultural theorist Stuart Hall was already drawing crowds.

If you can only see just one proverbial thing, however, perhaps make it the Walker. The city’s oldest gallery hosts the biannual John Moores Painting Prize, and the exhibition of more than 60 shortlisted painters whose cumulative efforts are a real joy.

Day trips can, however, spiral out of control. In the nearby LJMU Copperas Hill Building, there are not one, not two, but 14 separately curated exhibitions. This is home to the ongoing project City States, which brings together the best art from 13 international centres for art, together with prestigious show of graduate talent Bloomberg New Contemporaries.

For the record, Oslo and Birmingham seemed best represented with a Palestinian embassy in a hot air balloon, and a raft of fanzines and emphemera from the UK thrash metal scene.

But no Biennial would be worth its salt if it didn’t take you inside a hitherto out of bounds landmark. In Liverpool 2012, the exciting new gallery space can be found in the Cunard Building.

Fifteen artists are showing here. Not to be missed are Sylvie Blocher’s performative responses to the texts of Utopian speeches. And impossible to miss are Superflex’s handpainted reproductions of To Let signs from around the city. Hospitality clearly has a darkside.

Not all work is so out of the way. Two of the most high profile commissions can be found along with most of the townfolk in Liverpool One shopping centre.

These include an elevator which appears to have crashed up through the paving slabs (by Oded Hirsch) and a doorway marked VIP and manned by a bouncer (the ever-witty Elmgreen and Dragset).

Like Doug Aitken, these three artists have clearly benefited from the support of a highly commercial partner. Their pieces have plenty of sheen, but perhaps not enough grit.

For the real spirit of Black Mountain or Bauhaus, you may still need to lose yourself in the rest of the city. But the good news is there are plenty of chances at Liverpool 2012. Anyone interested in contemporary art should feel at home.